Global Liquidity and Cash Management Corporates ...

Global Liquidity and Cash Management Corporates Guidebook for Treasurers

Evolving Treasury Trends

Together we thrive

FOREWORD DIGITAL INNOVATION IN EMERGING MARKETS: INDIA FOCUS DIGITAL INNOVATION IN EMERGING MARKETS: CHINA FOCUS

BEING OPEN TO OPEN BANKING SUSTAINABLE TREASURY IN THE DIGITAL WORLD

PROTECTING TREASURY IN A DIGITAL WORLD LIQUIDITY MANAGEMENT: A WHOLE NEW WORLD

CONTENTS

Global Liquidity and Cash Management Corporates Guidebook for Treasurers

CONTENTS

2 Foreword 4 Digital Innovation in India:The Road Ahead 9 Digital India:A New Dawn for Treasury Management 14 On the Brink of a Cashless Society? 18 Being Open to Open Banking 23 Sustainability in Treasury:A View Beyond Financing 26 Case Study:Oceanagold - Future Proofing Growth 30 Latin American Cybersecurity:A Fast-Growth Priority 35 Case Study:AkzoNobel - A Journey with HSBC,

Building a Strong Partnership 38 Liquidity Management:A Whole New World 41 Global Liquidity:Faster, Deeper, Greater 44 Liquidity Management in Asia-Pacific:Change and Opportunity 47 Liquidity Management:Is Europe the New Asia? 51 North American Liquidity:Change, Challenge, Opportunity 55 Liquidity Management Portal:Finance at Your Fingertips

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Global Liquidity and Cash Management Corporates Guidebook for Treasurers

Foreword by Lance Kawaguchi, Managing Director, Global Head ? Corporates, Global Liquidity and Cash Management, HSBC

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FOREWORD

AN HSBC INDUSTRY VIEW

I would like to introduce this guidebook with a wealth of interesting and informative articles featuring HSBC's work across the globe, to help treasurers keep up to date with some of the most vital elements of their world today ? digitisation and technology. HSBC's extensive global footprint as well as some of its innovative product developments are highlighted in the range of areas covered in these articles, across the continents of Europe, North America, Latin America, India and Asia Pacific, and validated by recent case studies provided by clients.

India is already well on the way to becoming a digitally-empowered country. Many key milestones achieved since the 2015 launch of the government's Digital India initiative are described within, including the Smart Cities project, aimed at increasing the sophistication of India's urban infrastructure and services. The city of Hangzhou, China, is the home of technology giant, Alibaba, and the payment service provider, Alipay. Almost everything including utilities, public transport and retail services can be, and increasingly more often are, paid for by smartphone, rendering Hangzhou a virtually cashless city. In Asia-Pacific generally, liquidity management is proving a particularly dynamic feature, as regulatory changes within the region, shifts in US tax legislation and interest rates all present corporate treasurers with a wide range of opportunities.

Cybersecurity is frequently at the top of corporate treasury agendas and in Latin America it is a `fast-growth priority'. This booklet examines the current cybersecurity landscape in the region and explores some of the best practices for cyber risk mitigation. Indeed many of the articles on this subject demonstrate how HSBC, with its breadth and depth of security expertise and ability to effectively operate globally across all client sectors, can offer invaluable assistance to companies in safeguarding their finances data.

Partnership with our clients is of enormous importance to HSBC, and we are constantly expanding the range of solutions available to our customers. One featured here is our new Liquidity Management Portal (LMP), developed to help treasurers maximise liquidity

visibility by streamlining the underlying data management.

Other articles illustrate valued partnerships in action, with case studies provided by OceanaGold and AkzoNobel. OceanaGold, a fast-growing multinational gold producer, decided in 2012 to refinance its debt facilities and review its banking relationships; at the time it had mining operations in New Zealand and was opening a mine in the Philippines managed from its Melbourne HQ. For its new primary cash management bank the company chose HSBC. The success of the partnership validated the view taken by its Group Treasurer that "a partner who could support our growth trajectory and new locations would add value in terms of future-proofing".

HSBC's journey with AkzoNobel began in 2007, when the company embarked on a treasury transformation project called One Finance, a demanding project entailing changes to its banking infrastructure, treasury policies, technology and relationship with business units. In view of our extensive network, HSBC was appointed as its primary banking partner in many regions and countries, and was subsequently also awarded the sole mandate for trade finance activities. Since then, the relationship has grown significantly: AkzoNobel's Head of Treasury notes the major benefits her company has gained from the partnership, and we will continue to explore opportunities to expand and strengthen the relationship.

I am confident that the articles in this guidebook will prove to be a long standing source of useful information, and insightful exploration of the future of liquidity and cash management. I

Lance Kawaguchi

HSBC's extensive global footprint as well as some of its

innovative product

developments are highlighted in the

range of areas covered in these

articles and validated by recent case studies provided by

clients.

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Digital Innovation in India:

The Road Ahead

AN HSBC INDUSTRY VIEW

India is rapidly becoming a digitally-empowered society and economy, opening up new growth and efficiency opportunities for corporates along the way. Successfully embracing digital innovation is both a science and an art, however, as four industry experts explained during a lively panel debate at HSBC's recent Global Liquidity and Cash Management Digital Innovation and Transformation Forum hosted by Lance Kawaguchi, Managing Director, Global Head ? Corporates, Global Liquidity and Cash Management, HSBC in Mumbai.

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DIGITAL INNOVATION IN EMERGING MARKETS: INDIA FOCUS

Enabling business transformation through digital innovation

Eleanor Hill, TMI: How is India's digitisation journey progressing ? and how can corporates take advantage of digital innovation to transform their business models, drive growth, and reengineer legacy processes?

Divyesh Dalal, HSBC: Digitisation is advancing at a rapid pace across India, even in remote locations. Government and regulatory initiatives are among the key drivers, but consumer trends and technology evolution are adding to the momentum.

In terms of milestones, the reach of the country's digital ecosystem has improved markedly since the government launched the Digital India initiative in 2015. Alongside this, the National Payments Corporation of India (NPCI) has been working hard to build out new digital infrastructures, including the Unified Payments Interface (UPI) in 2016.

On the back of these co-ordinated efforts, the retail landscape has evolved, since more consumers are now able to make digital purchases with ease. Their confidence in technology is also growing, and cash transactions are steadily being replaced by electronic ones ? for everything from utilities to insurance and investments. In turn, corporates are quickly adapting their business models to better leverage digital innovation and revamping customer experiences to meet this new demand.

Rahul Tayal, LG: Absolutely. Updating and even reinventing our business model to leverage the power of digitisation is a top priority at LG. As a consumer electronics giant, our aim is to know our customers as well as we possibly can - in order to drive sales through one-to-one targeted promotions. The best way for us to do that right now is to further embrace digital innovation.

Unlike traditional marketing, digital marketing provides a platform to focus on a specific target audience. Moreover, campaigns are designed on the basis of consumer habits and preferences. Already,

over 400 million consumers in India are connected to the internet. The country is also home to 300 million smartphone users, each spending an average of four hours a day using apps. There is therefore a tremendous potential to target a particular audience; digital media is evolving and new trends are emerging.

The other important aspect of digital marketing is that brands can now go beyond the 20- or 30-second television commercial and create more effective, and more amplified, digital communications. For example, today we are capable of launching a product in one city and then connecting our trade partners, employees and consumers to it ? across India and the world ? through social media platforms at the same time. This helps in creating awareness and recall for a new launch. It also creates engagement with the audience, which in turn translates into leads.

Srinivas Jain, SBI Mutual Fund: We are also looking into the possibilities that data holds, as well as digital innovation as a means to improve legacy processes. The back end of our business has been digital for some time, but the front end has traditionally been paper-based and many of our treasury customers still send us instructions by fax. While we have an automated fax management system that has led to process efficiencies, we wanted a better way to serve our 6,000 odd institutional clients.

So, in 2016, we set up a digital platform for our institutional investors. More recently, we have also embraced virtual accounts, to help ensure the appropriate allocation of client funds, in a more automated way. Uptake of such solutions among clients is currently around 20% but is increasing as clients start to see the efficiency benefits and appreciate the user experience.

For SBI Mutual Fund itself, the value of these digital solutions stretches beyond automation to real-time investor insights. The data from the platform enables our institutional sales team to proactively reach out to customers with suggestions for switching between funds to achieve a better rate, for example. We're also experimenting with leveraging the platform data to create reports on behalf of

Forum Host:

Lance Kawaguchi Managing Director, Global Head Corporates, Global Liquidity and Cash Management, HSBC

Panellists:

Srinivas Jain Executive Director and Chief Marketing Officer, SBI Mutual Fund

Nikhil Sohoni Senior Vice President ? Finance and Treasurer, Mahindra & Mahindra

Rahul Tayal Director Strategic Business and Marketing, Digital and Ecommerce, LG Electronics India Pvt. Ltd

Divyesh Dalal India Head, Global Liquidity and Cash Management, HSBC

Moderator:

Eleanor Hill Editor, TMI

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The Boston Consulting Group (BCG) is an American worldwide management consulting firm with 90 offices in 50 countries. The firm advises clients in the private, public, and not-for-profit sectors around the world, including more than two-thirds of the Fortune 500 and is one of the 'Big Three' strategy consulting firms (MBB).

LG Electronics India Pvt. Ltd. manufactures and sells consumer electronics, home appliances, computer products, and mobile phones in India.

SBI Funds Management Pvt. Ltd has 30 years of experience in funds management and brings forward its expertise by consistently delivering value to its investors. It has a strong and proud lineage that traces back to the State Bank of India (SBI) - India's largest bank. It is a Joint Venture between SBI and AMUNDI (France), one of the worlds' leading fund management companies.

Corporates are quickly adapting

their business models to better leverage digital innovation and

revamping customer experiences to meet this new demand.

our clients: not just performance reports; but opportunity reports too, flagging interesting investment options for the treasurer.

Finally, we are using digital innovation to improve our analytics and modelling, specifically around liquidity. One of the widely recognised challenges in the mutual fund industry is that liquidity tends to tighten at certain points in the cycle ? such as quarter end. Armed with the data from the platform, we can now build up a much clearer picture of liquidity in real time, and then optimise the portfolio as required.

Nikhil Sohoni, Mahindra & Mahindra: Picking up on some of the points Srinivas raised, it's very true that many treasurers still like to send faxes in connection with their investments, including instructions to move monies between investment funds. At Mahindra & Mahindra, we saw this as a hugely inefficient process, so decided to swap to a digital solution: the SWIFT India platform.

We are the first (and currently still the only) company in India to sign up to this payment platform and we are already seeing significant efficiency benefits. Today, before coming to this event, I invested large sums in just four clicks. That's the beauty of digitisation. No faxes, no reconciliations and no waiting for confirmations. It is seamless.

Besides SWIFT India, we're exploring a number of other digital avenues, looking for new solutions to reduce the resource burden and increase efficiency within the treasury function. We've also attempted a foreign remittance using blockchain, which was a good learning experience. UPI doesn't really fall into our remit in this part of the business, because the value of the payments we send or receive are simply too high. That said, we absolutely recognise the potential of UPI within the right marketplace. We have explored it in a few of our group companies and are already seeing the benefits.

Elsewhere, we are considering advanced digitisation tools and are exploring leveraging artificial intelligence (AI) to enhance our foreign exchange (FX) hedging practice. On many occasions, we tend to react to movements in currencies. The idea of leveraging AI is to be more proactive than reactive, aim to predict currency moves with greater accuracy.

For treasury, this kind of digital innovation offers significant efficiency gains as well as strategic wins. Nevertheless, it's important to realise that digitisation is an evolving trend, and what's possible now is actually just the tip of the iceberg.

A pathway to greater strategic focus

Eleanor Hill, TMI: To what extent does embracing digital innovation allow businesses ? as well as finance and treasury functions ? to be more strategic? Could you give some practical examples?

Rahul Tayal, LG: Embracing digital innovation undoubtedly opens up opportunities for more strategic thinking ? whether that be at the boardroom level, within sales and marketing, or in treasury and finance. As I explained, at LG, digitisation is allowing us to get to know our customers that much better, meaning that we can be far more strategic in the way we sell to them.

Increasingly, we are launching integrated campaigns with a focus on digital platforms. As an example, certain ranges in our product offering, such as air purifiers and water purifiers are directed towards health-conscious people; and through digital platforms we are targeting campaigns for these products through health influencers ? namely celebrities. This has helped in reaching a specific target group, thereby generating greater return on investment (ROI) for our marketing and sales teams.

In short, digital innovation is helping us to be more strategic about the customers we target and the offers we send them. Blanket marketing is a thing of the past; strategic partnerships fuelled by shared data are the future.

Nikhil Sohoni, Mahindra & Mahindra: We have been innovating around payments and collections platforms. Although I mentioned that UPI was not the right tool for Mahindra & Mahindra Limited, we now use it extensively in one of our consumer-facing businesses, Mahindra Rural Housing. The company provides loans to farmers who are located

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